Spotlight: U.S. Postal Service

Which independent federal agency’s predecessor was created on July 26, 1775, by a decree of the Second Continental Congress? Here’s a hint: it’s also the third-largest civilian employer in the nation (behind only the federal government and Wal-Mart) and maintains the largest fleet of vehicles (more than 218,000) in the world. The correct answer is the United States Postal Service (USPS), which employs some 552,000 career workers—though that number is down from almost 753,000 in 2002 and is expected to shrink even more in coming years, as the service downsizes in response to significant decreases in the volume of first-class mail.

The “Postal Clause” of the U.S. Constitution empowered Congress to “establish post offices and post roads,” transforming the U.S. Post Office into the Post Office Department in 1795 (and making it one of only a few federal agencies explicitly authorized by the Constitution). The department originally was part of the presidential cabinet, until President Richard Nixon signed the Postal Reorganization Act in 1970, creating an independent USPS as of July 1, 1971. The agency is run by an 11-member board of governors that operates much like a corporate board of directors. Nine of the governors are appointed by the president and confirmed by the Senate; they then select the U.S. Postmaster General, who acts as the agency’s CEO, and a Deputy Postmaster General, who serves as its COO. (These two individuals fill the tenth and 11th seats on the board.)

USPS headquarters are located at 475 L’Enfant Plaza, SW, in Washington, D.C. The agency operates a vast retail system of nearly 36,000 post offices and other facilities throughout the nation. Many of these are owned by the USPS; others are leased, either from private sector owners or other government agencies. (Post offices often are housed in buildings owned or leased by other government organizations—for example, in courthouses and other federal buildings; in those cases, the USPS operates as a tenant of the GSA). In addition to post offices, the agency maintains hundreds of mail processing centers, including regional distribution centers, local processing centers, destination processing centers, airport transfer centers—and two remote encoding centers, in Salt Lake City and Wichita, Kansas, where clerks receive images of problem mail pieces, decipher hard-to-read addresses and type the correct addresses using a special encoding procedure.

The USPS is legally obligated to serve every residence and business in the United States, regardless of geographic location, at uniform prices and quality of service. It brought in $66 billion in revenue and processed almost 168 billion pieces of mail last year. While it has not received direct taxpayer dollars since the early 1980s, the USPS does get millions of dollars worth of implicit subsidies annually, in the form of breaks on property tax, vehicle registration and sales taxes, as well as government loans. With rapidly declining revenues, the agency has been exploring other sources of revenue as well as ways to cut costs to reduce its budget deficit. Many, however, argue that this deficit has been largely created by the Postal Accountability and Enhancement Act of 2006, which requires the USPS to pre-fund 75 years worth of future healthcare benefits to retirees with a ten-year timeframe, something that no other government agency is required to do.

In February, the agency announced that it planned to close more than half of its mail processing centers (264 out of 461) as part of a “network optimization” move that would also eliminate 35,000 jobs, end overnight delivery of first-class mail—and save more than $2 billion a year. However, in response to pressure from Congress, it had already (December 2011) agreed to delay closing any processing centers, as well as up to 3,700 local post offices, until May 15—and even that deadline is not a firm one. Speaking last week on the C-Span television show “Newsmakers,” Postmaster General Patrick Donahoe acknowledged that while immediate legislative action is needed to fix USPS financial problems, revenues are currently running slightly ahead of projections, while continuing cost-cutting efforts also are helping the bottom line. Therefore the agency’s cash-flow situation “is OK through the fall and into probably late next year,” he noted, adding that “any changes [i.e., closures] that we make will be incremental over the course of the summer.” No additional closures are expected between August and the end of the year—that is, until after the November 2012 presidential election.

The USPS already has begun replacing some low-volume local post offices with “village post offices”—facilities in local stores that it pays to offer limited postal services, like this one in Kailua-Kona, Hawaii.